Calculation of Average Costs with Economies of Scope Building Supplies

question 73

Multiple Choice

Calculation of Average Costs with Economies of Scope Building Supplies is considering a merger with Tools and More.Building's total operating costs of producing services are $4 million for a sales volume of $20 million.Tools' total operating costs of producing services are $1 million for a sales volume of $5 million.Suppose that synergies in the production process result in a cost of production for the merged firms totaling $4.8 million with total sales remaining unchanged.Calculate the total average cost for the merged firm.

• A)9.6 percent
• B)40.0 percent
• C)19.2 percent
• D)20.0 percent

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Definitions:

Protestant Rule

The governance or dominant influence of Protestant denominations in a political or social context.

Cromwell

Refers to Oliver Cromwell, a key figure in British history who led the parliamentary forces in the English Civil War and later ruled as Lord Protector.

Ireland

An island in the North Atlantic, divided into the Republic of Ireland, an independent nation, and Northern Ireland, part of the United Kingdom.

Puritans

A group of English Protestants in the 16th and 17th centuries who sought to purify the Church of England of Roman Catholic practices, maintaining that the Church of England was only partially reformed.